Gold ETF inflows ease in May
Investments in Gold exchange-traded funds declined to Rs103 cr from Rs124cr in April; With pertinent risks still engulf developed economies, investors flocked to gold ETFs, which is considered as a safe haven during uncertain times
image for illustrative purpose
New Delhi Gold exchange-traded funds (ETFs), considered a safe haven during uncertain times, continue to glitter as they received a net inflow of Rs103 crore in May.
The development comes after a net inflow of Rs124 crore witnessed in the asset class in April. Before that, investors withdrew Rs266 crore from Gold ETFs in March, data from the Association of Mutual Funds in India (Amfi) showed. The slightly low inflow in May compared to the preceding month could be attributed to profit booking. Gold price came off its highs towards the second half of May on the back of positive news with regards to the US government raising the debt ceiling, thereby providing some buying opportunity, particularly after a sharp rally it witnessed since March this year, Melvyn Santarita, Analyst-Manager Research, Morningstar India, said. “With gold prices still trading at high levels, some investors would have chosen to book profits or take on risk on approach with a view that central banks would pause further rate hikes.
“This view seems to be materialising. That said, pertinent risks still engulf developed economies, and therefore, over the course of the month, investors flocked to gold ETFs, which is considered as a safe haven during uncertain times,” Santarita added.
According to the data, gold-linked ETFs saw an inflow of Rs103 crore last month, which helped in raising the assets under the management of such funds to Rs23,128 crore at the end of May from Rs22,950 crore at the end of April. Gold, with its superlative performance over the last few years, has attracted significant investor interest, and the consistent surge in its folio numbers is a testimony to the same. The folio numbers in gold ETFs surged by 15,000 to 47.28 lakh in the month under review from 47.13 lakh in April. This shows that investors have become more inclined towards gold-related funds. In the entire financial year 2022-23, inflows into gold ETFs stood at Rs653 crore, a decline of 74 per cent year-on-year from the Rs2,541 crore infusion seen in 2021–22. This drop was mainly due to profit booking in this asset class and investors’ preference for equities. However, the asset base of gold ETFs and investors’ account or folio numbers increased in the last fiscal year.
Gold ETFs, which track the domestic physical gold price, are passive investment instruments that are based on gold prices and invest in gold bullion. In short, gold ETFs are units representing physical gold, which may be in paper or dematerialised form. One gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. They combine the flexibility of stock investment.
Profit Booking
• Gold price came off its highs in second half of May
• US govt’s decision to raise the debt ceiling provided some buying opportunity
• As it followed a sharp rally witnessed since March
• Amfi says it’s due to profit taking
• ETF AUM rise to Rs23,128 cr in May from Rs22,950 cr in April
